China is heavily reliant on exports to drive its economy -- the second largest in the world -- and the downturn in key US and European markets is already hurting manufacturers who employ millions of workers. The official purchasing managers' index (PMI) -- based on a survey of 820 manufacturers -- dropped to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement. Analysts had expected 51.7, according to a Dow Jones Newswires survey. "The fall in the October PMI indicates that economic growth is likely to slow further in the future," Zhang Liqun, a government analyst, said in the statement. A reading above 50 indicates the sector is expanding, while a reading below 50 suggests a contraction. An index measuring new export orders fell to 48.6 in October from 50.9 in September while the input price index, a gauge of raw material costs, plunged to 46.2 from 56.6, the federation said. HSBC, meanwhile, said its survey of more than 430 purchasing managers showed activity expanded slightly, with its index hitting 51.0 in October compared with 49.9 in September and the first time it has gone above 50 since June. The British banking giant said new export orders rose in October, ending a five month period of contraction, while input costs continued to increase. HSBC chief economist Qu Hongbin said inflation was "on track for easing", providing Beijing with room to "fine-tune policy to strike a better balance between growth and inflation pressures". But analysts said the government's broader PMI survey was a more accurate reflection of the country's manufacturing sector. "The policy environment is relaxed a little bit but it will not be reflected by the October data so quickly," said Ren Xianfang, a Beijing-based analyst with IHS Global Insight. "October was actually the most pessimistic period for the manufacturing industry." China's economic growth eased to 9.1 percent in the third quarter from 9.5 percent in the second quarter as government efforts to tame inflation, as well as economic turbulence in Europe and the United States, curbed activity. Premier Wen Jiabao indicated last week that the government might relax tight credit restrictions as small exporters struggle to pay their bills and falling property sales threaten to drive debt-laden developers to the wall.